In Praise of Salary Transparency

One of the unspoken traditions of corporate life is keeping salaries secret. If, for example, an employee somehow discovers that a coworker with the same job is paid $20,000 more, a fiasco may arise. “I’ve seen people cry and scream at each other,” Dane Atkinson, CEO of New York analytics startup SumAll, told NPR’s Lisa Pollack in a recent Planet Money episode.

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Atkinson told NPR that this drama over worker compensation is why he decided to make all employee salaries transparent when he founded SumAll in 2011. Today, SumAll has 40 employees, and every employee's salary is included in a company-wide Google Doc. The policy has resulted in lower employee turnover rates because workers feel free to voice concerns when they're unhappy with their pay, the company told Business Insider.

It took some time, however, to figure out the best way to implement pay transparency. When Atkinson built his initial team of 10, they worked together to determine the salaries of specific jobs. As the company grew, Atkinson told NPR, some seasoned employees were upset that they had to abide by that initial one-size-fits-all pay package for their job.

Things started to work more smoothly when Atkinson allowed salaries to be negotiable from the start. Now if someone has a problem, Atkinson is willing to listen.

NPR spoke with SumAll's head of marketing, Chris Jadatz, who explained that after he saw that the person whose job he was taking made around $95,000 compared to his $55,000, he felt “underpaid, as if maybe I was being overlooked,” he said. Jadatz met with Atkinson and discussed his concerns. Atkinson determined that while Jadatz may not yet be as valuable as his predecessor, he deserved a $20,000 raise, which both parties were happy with.

NPR's Pollack explained:

At SumAll, meetings like this happen all the time. And for Atkinson, the boss, it's one of the best parts of having pay out in the open—a chance to talk to people not just about what they make, but why. And often, it doesn't end with a raise. Often, he has to explain that the reason why the person makes more than you is that she's more valuable to the company. And if you do what she's doing, you can make more, too. The way Atkinson sees it, transparency is a defense against the games that bad bosses can play. For instance, you can't pay women less than men if everybody can see what you're doing.

This strategy doesn't just work for startups like SumAll. Whole Foods is a prominent supporter of making salaries transparent, a policy it's had since 1986. At the supermarket chain, employees can look up salaries for everyone from its cashiers to the co-CEOs.

NPR reports that SumAll’s open-salary policy hasn’t been a major source of tension among the team. “It was way less exciting than I wanted it to be,” customer support manager Mahssa Mostajabi told NPR. She expected to be shocked by some of the numbers she discovered, feeling as if she saw too much, but ultimately wasn’t.

An anonymous CEO of another company with salary transparency explained to NPR that Mostajabi's reaction, a common one, is similar to how many Americans imagine topless beaches in Europe to be “the craziest thing in the world…. And then you get there and it's like, ‘Okay, nobody is flipping out because people are topless here. It’s just how things are,’” he said.

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